It is still controversial whether photosynthesis is mainly restricted by diffusional or biochemical limitation under drought and salinity stress, and new adaptive mechanisms may appear when the two stresses interact. We measured water relations and photosynthetic responses under different water and NaCl treatments in two halophyte seedlings that coexist in northwestern China, a C3 plant Tamarix elongata Ledeb and a C4 plant Haloxylon ammodendron (C. A. Mey.) Bunge. Water potential values decreased with increasing salinity, and lower water potential values were measured in H. ammodendron and T. elongata under drought treatments. Leaf Na+ concentration increased and K+ concentration decreased with the intensification of the salinity treatment in H. ammodendron and T. elongata. The observed enhancement in Na+ concentration may be an adapting mechanism associated with osmotic regulation. The stomatal (Ls) and mesophyll (Lm) limitations co-controlled the photosynthetic rate of the two species. However, there were no significant differences in Ls but an increase in Lm under salinity stress with the well-watered condition, indicating mesophyll regulation of photosynthesis played a more important role than stomatal closure for the two studied species. Our results indicate that the reduction in photosynthesis for the two species is co-limited by both stomata and mesophyll under the combined drought and salinity conditions, but that Lm is the main limiting factor under salinity stress. It is also suggested that the C4 plant H. ammodendron is more drought- and salt-tolerant than the C3 plant T. elongata, so it is more widely distributed in arid saline environments.